Alternatives to Private Student Loan Forgiveness

Holly D. JohnsonDecember 27th, 2016

If you’re struggling with crippling student loan debt, you’re not alone. According to a recent analysis from the Institute of College Access and Success, the average undergrad student faced more than $30,000 in student loan debt in 2015.

This much debt, coupled with higher than average unemployment and underemployment rates for young people, has left many new grads looking for a way to afford their loans. Unfortunately, some of the most problematic student debt comes in the form of private student loans. Since private loans are handled by private lenders and not the federal government, they offer fewer options for those who need help with repayment or forgiveness.

Private Student Loan Forgiveness: What to Do Instead

Whether you have federal or private student loans, there are several steps you can take to reduce your burden – or at least buy some time. Here are some of the top options to consider right now:

Talk to your lender

If you’re struggling to make your student loan payments, keeping your lender or loan servicer in the loop is essential. Not only should you let them know of any impending issues with your loan payments, but you should ask them which options, if any, might be available to you.

If you have private student loans with Sallie Mae, for example, you may be able to qualify for forbearance. While forbearance can only be granted for 12 months, it lets you skip your loan payments during that time without penalty. However, interest will continue to accrue on your subsidized and unsubsidized loans (including all PLUS loans).

With deferment, on the other hand, your lender will temporarily stall your monthly payment and the federal government will cover your interest payments on certain types of loans.

While avoiding your loans for any length of time may not sound like a good idea, this is the best option for many. With some time or a “break,” you can at least work toward finding employment that will help you afford repayment in the future.

The best way to find out if you qualify for forbearance, deferment, or private student loan forgiveness is to speak with your lender, explain your situation, and ask for help. The last thing you want to do is let your loans fall into default without letting your lender know what is happening, or why.

Try an alternative repayment option

While it’s almost always assumed you’ll take 10-year, standard repayment on your loans right out of the gate, you don’t have to stick with this option. As the U.S. Department of Education notes, you can usually change your repayment option for free – and at any time. While changing your repayment timeline won’t make your loans go away, it can reduce your monthly payment and make your loans more affordable in the short-term.

When it comes to alternative repayment plans, there are several options available. With a graduated repayment plan, you could pay lower payments at first then graduate to larger payments later on. With extended repayment, your payments could be graduated or fixed for up to 25 years. If you’re interested in learning more, check with StudentAid.ed.gov for more details on alternative repayment options.

Choose income-driven repayment

If you feel your student loan payment is too high in relation to your income, you should look into income-driven repayment plans sponsored by the federal government. With these plans, you’ll pay a set percentage of your “discretionary income” for a specific length of time, then have your loans forgiven in the end. Keep in mind, however, that income-driven repayment is only available if you have federal student loans (not private loans).

With Pay As You Earn (PAYE), for example, you pay 10 percent of your discretionary income for 20 years. Once you complete the program in its entirety, your loans are forgiven. However, you are required to pay income taxes on any forgiven amounts.

To qualify for PAYE and other income-driven repayment programs, your monthly payment must be less than what you would pay under standard, 10-year repayment.

Refinance private loans

While it can be extremely difficult to find private student loan forgiveness, you may be able to refinance your loans at any time. By refinancing your loans, you could qualify for a lower interest rate, a longer repayment timeline, or a monthly payment that’s more affordable.

Since private student loan refinancing is offered through private lenders, you’ll need to meet basic income and credit requirements to qualify. Those requirements may include:

A good credit score

A job or proof of income

A reasonable debt-to-income ratio

Since each company has different requirements, it’s important to conduct due diligence before deciding if this option is for you. And if you’re curious how student loan refinancing might benefit you, LendingTree can help. After filling out a simple application, you’ll be able to compare rates from popular lenders like LendKey, SoFi, and College Ave Student Loans.

Earn more money

If you’re not keen on the idea of refinancing or seeking out alternative repayment options, the best way to afford your loans is probably the hard way – earning more money. If you can boost your income enough to comfortably handle your loan payments, you can move forward with repayment without the hassle or stress of exchanging loans.

Earning more money may not be easy, but it can definitely be done. If you aren’t currently working, getting any job will make your finances run more smoothly. If you have a full-time or part-time job already, on the other hand, you can ask to pick up more hours.

If you’re already working, consider picking up a side hustle to earn more cash instead. By watching dogs, babysitting, housesitting, or running errands through a site like TaskRabbit.com, you could potentially earn enough to make student loan payments easier to handle.

Final Thoughts

With average student loan debt surging every year, the pain of crushing debt won’t stop soon. Fortunately, there are at least some options to help young people negotiate better repayment plans or have their loan forgiven altogether.

If you find you’re struggling and don’t know what to do next, any of the options on this list may help. The best thing you can do is conduct plenty of research and ask questions. Help is available, but it’s up to you to find it.